A solution to young people and affordability

There is a solution for housing affordability that the Govt could consider that still fits with its position on negative gearing, credit tightening and also CGT. Not only would this policy shift encourage investment and likely construction activity that supports economic growth and jobs it may encourage those who cannot afford to invest by maximising available housing stock to alleviate shortages in rental supply.

• Extend the main residence exemption so that a newly constructed owner occupied residence that is also income producing retains its 100% exemption if one or both owners continually occupy at the same time as it produces income from accomodation rental of a shared use of the main portion of the residence (This would exclude GF rentals and boarding where a shared use isnt available). This would need to be a limited period after acquisition ie 3, or 5 years.
• Would need to exclude all non-arms length tenancy like arrangements.
• Maintain the existing tax treatment of rental income and deductible expenditure.
• Encourage lenders to consider the income from rental to be applied to servicing in the same instance
• Treat the property in such instances as qualifying for all FHOG and other concessions.

Any other ideas ?? Dont hesitate to encourage your local member to consider rethink solutions to housing.

 

This is just a thought bubble but perhaps if state and federal governments got really serious about housing affordability they could look at some kind of arrangement to significantly reduce or eliminate stamp duty for owner occupiers (especially when you see the recent self congratulatory announcement from the NSW state government about a 4 billion budget surplus) and maybe the federal government adopt a US style of mortgage deductibility (in relation to income tax) for owner occupiers.

 

IMO, the home-owner deductibility is a slippery slope. The "less aware" will end up trading up to a bigger mortgage for the tax benefit. And with the way lending is (was?) here - "Equity, mate!" - you could end up with a terribly mixed loan. Imagine trying to re-educate all the bank employees on the real difference between offset and redraw!

However, I agree with your suggestion about stamp duty - to me this is a terrible tax. And not just because I've paid more than a fair share! There must be better way to manage it, but it will take a better mind than mine to come up with the solution.

 

None of that will help affordability in the long-run, it will hit the budget and give first home buyers more money to bid up prices.
Same thing ended up happening with FHOG.

Putting more benefits in FHO hands bids up prices and hits the budget.

It makes more sense from the government point of view to reduce benefits to everyone else.

 

There are numerous reasons why the Australian property market is so unbelievably unaffordable & it will take a combination of large scale changes to even have a marginal impact.

Stamp duty concessions/changes, housing density, zoning, land release, taxation laws such as negative gearing, infrastructure, decentralised city/town planning, industry relocation incentives to non-CBD locations etc. etc...

There are a myriad of reasons why the Australian market is out of step globally. It will take far more than one or two policy tweaks to have any noticeable impact upon affordability.

 

But if you listen to mainstream media and the lefty think tanks they will tell you it is the evil investors and all the so called generous tax benefits they get that is responsible for driving the current house prices (not that I subscribe to that theory). Some will say that those trying to get into the market are at a disadvantage because they don't get the generous tax benefits that investors get.

Isn't it more of a case that the Sydney and Melbourne property markets are so unbelievable unaffordable?

 

Agree.

If you consider that approx 30% of all property is an investment (this figure fluctuates a bit depending on market and economic state and sentiment) but longer term it is around this amount.

So, it stands to reason that the majority of price setting is by owner occupiers.

Many investors try to pay as little as they can for their IP's, so are more likely to try and force the price back down, while a PPoR buyer who is more emotionally attached to a property may be inclined to pay more near the asking price or higher.

There are occasions where investors will pay more than the asking price in an overheated market...but then so do the PPoR buyers in that market.

 

The RBA even struggle to quantify the proportion of investment housing etc. The data is so poor they recently (2015) had to revert to 2011 Census data (and we know how unreliable the latest census was so dont expect revision soon)

http://www.rba.gov.au/publications/...tment-housing-relative-owner-occ-housing.html

Interesting graph 23....Rental properties as a % of the market has declined over the long run to 2011. Why ? Because housing affordability improved ? I imagine that line now trends upwards but by how much ? Probably not that much. Even a factor such as AirBnb will skew the affordability stat to look worse.

Note also that the RBA consider most investors to be owner occupiers. This issue is a complex one and includes those who rent but own elsewhere !! Also noted is around 9% of investment stock does not produce income and the census data doesnt address this hole by the method of obtaining data.

 

The two big ones IMO

 

Worth mentioning but affordability is tough globally right now. Not just in Syd/Melb.

The international house price index is back to the peak just before the GFC.

Also worth mentioning that most cities outside of Syd/Melb are totally affordable....

 

So if the RBA is struggling to get accurate data it does make me wonder what supposed credible data is being used by some of the so called influential experts (such as the lefty Grattan Institute) to take the position that negative gearing and CGT discounts are the root of all evil when it comes to affordable housing. Oh well, I guess it's a case of not letting the true facts stop you from advancing an agenda.

 

Perhaps Sydney?



Not so in Melb, there are plenty of affordable areas within 12-17 km from CBD and desirable pockets in south east.

 

Yep, my grandparents told me that when I was was 17. That was over 40 years ago.

Yep, my parents told my kids that when they were in their late teens. That was over 15 years ago.

My kids (both in their 30's) have purchased multiple properties each, total value more than $3M. I have accumulated a nice little property portfolio over the last 30 years.

I have decided to break the cycle. I am not going to tell my grandchildren that Australian property is unaffordable. I am going to tell them to get educated, to work hard, ...

I have a two year old granddaughter. She goes to OFI's, collects brochures, checks out properties, ...

She hasn't submitted an offer as yet, but at the rate she is going, it won't be long .

 

I love this post especially the part about your kids, who I have no doubt have made some significant lifestyle sacrifices along the way to get where they are--no smashed avacardo for them and over priced hand crafted free trade coffees I am so stick of hearing how unaffordable real estate is--has real estate ever been truly affordable...your post is a refreshing change to say the least.

 

Just came across this...wow, you folks in Victoria pay a much high rate of stamp duty even though Sydney has a median house value that is about $200k more than Sydney. However, if you're a first home buyer go to Melbourne and stay away from Sydney 'cause it seems the Vic government is offering a stamp concession for first home buyers. With a a spare 4 billion floating around in NSW's coffers I wonder if NSW should be taking a lead from Victoria.

Property News – onthehouse.com.au

 

so even the experts don't know what to do about housing affordability

No recommendations from two-year inquiry into housing prices

 

Solution - come to Qld and boost our economy.

 

Its one of the reasons why Treasury give advice to the Treasurer. The media and the minority will whinge and that may have a electoral impact but if you end NG you will upset a lot of property investors.

 

Where do I go to learn to drive like a Queenslander ?